Indiana State Life and Health Insurance Practice Exam

Which annuity choice would NOT be acceptable for a 39-year-old female planning to receive income starting at age 60?

1. Flexible Premium Deferred annuity

2. Variable annuity

3. Immediate annuity

4. Straight Life annuity

The correct answer is: Immediate annuity

An immediate annuity is designed for individuals who are ready to receive income payments right away, typically after making a lump-sum payment. This income stream starts almost immediately following the purchase of the annuity, which makes it unsuitable for someone who plans to begin receiving distributions much later, such as at age 60. In the case of a 39-year-old female planning to start receiving income at age 60, an immediate annuity would not fulfill her needs. Instead, products like the flexible premium deferred annuity or a variable annuity allow her to contribute funds over time to grow her investment until she is ready to begin withdrawals at age 60. Additionally, a straight life annuity, which provides payments for the lifetime of the annuitant, also requires a deferral period, meaning it would not begin until the specified start age is reached. Thus, the immediate annuity is the only choice that does not align with her objective of deferring income until she is 60 years old.